Why marijuana will be a ‘shadow’ business for a long time

Ed Zwirn
November 5, 2016
New York Post
Never mind Clinton vs. Trump: Millions of Americans can expect to wake up Wednesday and indulge in a soothing palliative to take the edge off the results of a contentious presidential election.
On Tuesday, five states will decide whether to join Colorado, Washington, Oregon, Alaska and Washington, DC, in legalizing marijuana for “adult recreational“ use.
Polling in California, Nevada, Arizona, Massachusetts and Maine shows that, while legalization is slightly favored by voters, the margins are very close.
Taken together, a successful outcome for these ballot measures could add $4.2 billion to legal marijuana retail revenues by 2018, on top of the $6.5 billion projected for the current year, according to Matt Karnes of GreenWave Advisors.
Marijuana still being illegal throughout much of the US, these revenue figures are dwarfed by the money spent in the black market to purchase it. Although accurate figures are hard to come by, Karnes guesses that some $50 billion is being spent on the drug each year.
In New York, where recreational marijuana is still verboten, the vast majority of the money spent on marijuana is occurring via the black market, with only about $17 million expected to be earned this year by the five medical marijuana providers licensed by the state.
Despite the results from the ballot box, marijuana is probably going to remain largely a “shadow“ business for some time, with entrepreneurs facing significant hurdles on the federal level, including penalizing tax rules and barred access to interstate banking.
These federal hurdles for legal marijuana are being addressed by proposals in Congress. One such bill is the Marijuana Access to Banking Act, which would allow banks to do business with state-legal marijuana entrepreneurs.
Another, the Small Business Tax Equity Act, would allow these businesses to take ordinary business deductions denied to them because of their product’s Schedule I status.